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Edited version of your private ruling
Authorisation Number: 1012441133942
Ruling
Subject: Income tax exemption - tourism association
Question 1
Is the ordinary and statutory income of the Entity exempt from income tax pursuant to section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it is a tourism association as per item 8.1 of the table in section 50-40 of the ITAA 1997?
Answer
Yes
This ruling applies for the following periods:
01 July 2013 to 30 June 2015
The scheme commences on:
01 July 2013
Relevant facts and circumstances
· The Entity is a company limited by guarantee.
· The Entity's constitution contains an appropriate non-profit clause in relation to its operations and on winding up.
· The objective of the Entity as per its constitution is to promote the development of tourism in the region.
· The Entity conducts an annual event.
· The Event attracts many visitors each year to the region.
· The Entity has won a number of tourism awards.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 50-1
Income Tax Assessment Act 1997 section 50-40
Reasons for decision
Summary
The Entity is an association that is established for the purpose of promoting the development of tourism and is not carried on for the profit or gain of its individual members and as such is considered to be an exempt entity.
Detailed reasoning
Section 50-1 of the ITAA 1997 exempts the ordinary and statutory income of an entity covered by section 50-40.
Item 8.1 of section 50-40 describes a society or association established for the purpose of promoting the development of tourism that is not carried on for the profit or gain of its individual members as an exempt entity.
Each element will be considered below:
Society or association
The terms 'society' and 'association' are not defined. They take on their ordinary meaning. The Macquarie Dictionary defines an association as 'an organisation of people with a common purpose and having a formal structure'. A society is defined as 'an organisation of persons associated together for religious, benevolent, literary, scientific, political, patriotic, or other purposes'.
The Entity is formed as a company limited by guarantee. It has a board of directors and exists for a defined purpose. Therefore it displays the characteristics of a society or association.
Promoting the development of tourism
To be exempt, an association must be established principally or predominantly for the purpose of promoting tourism.
Tourism is not defined and takes on its ordinary meaning. The Macquarie dictionary defines tourism as 'the occupation of providing local services, as entertainment, lodging, food, etc., for tourists'.
The Explanatory Memorandum to Taxation Law Amendment Act (No3) 1993 states that 'for income tax purposes, the activities of such tourism industry organisations may be international, national or regional in nature.
The purpose of the Entity is set out clearly in their constitution. That is, to promote the development of tourism in the region.
The Entity conducts an annual event. The event is conducted to draw tourism to the town.
Furthermore the Entity has been recognised for their contribution to tourism through the receipt of a number of tourism awards.
Therefore it is accepted that the principal purpose of the Entity is the promotion of the development of tourism.
Non-profit
The association must not be carried on for the purpose of profit or gain to its individual members. Its constituent documents should contain a prohibition against distribution of profits and assets among members while the association is functioning and on it's winding up.
The Entity's constitution contains suitable non-profit clauses that prohibit distribution of assets and profits amongst members whilst the Entity is functioning and on its windup. Therefore this requirement is satisfied.